Research House Motilal Oswal has reiterated its BUY recommendation on ICICI Bank with a target price of Rs 1,550, reflecting a potential upside of 17% from its current market price of Rs 1,328.

Summary of Investment Opportunity

ICICI Bank has showcased strong financial performance underpinned by robust loan growth, stable asset quality, and superior operating efficiency. The bank’s focus on strengthening its retail deposit base and leveraging technology for operational efficiency sets it apart. Despite industry-wide challenges, ICICI Bank’s proactive strategies in risk management, customer targeting, and technology investments make it a top pick in the financial sector. Motilal Oswal’s detailed analysis highlights an estimated 15% CAGR in pre-provision operating profit (PPoP) and 12% CAGR in profit after tax (PAT) over FY25-27.

Strong Loan Growth Across Segments

- Healthy CAGR: ICICI Bank achieved a commendable 17% CAGR in loan growth between FY22 and FY24, driven by Retail, SME, and Business Banking segments.
- Risk Management Focus: Despite the overleveraging concerns in unsecured lending, the bank’s tightened underwriting standards have ensured robust credit quality.

Retail Deposit Strength and Profitability

- Deposit Growth: Deposits grew by ~20% YoY in FY24, driven by an enhanced digital banking experience and an extensive branch network.
- CD Ratio: The bank maintained a healthy credit-to-deposit (CD) ratio of ~85%, reflecting balanced growth.

Margins and Earnings Outlook

- NIM Compression: While the net interest margin (NIM) declined by 27 basis points to 4.27% YoY, ICICI Bank’s diversified loan book and deposit mobilization strategy are expected to stabilize margins.
- Earnings Growth: Motilal Oswal projects margins to moderate to 4.2% by FY26 due to potential repo rate cuts but anticipates steady earnings growth from strong operating leverage.

Operating Efficiency and Fee Income

- Core Fee Growth: Core fee income increased by ~16% in FY24, led by Retail and Business Banking.
- Cost Ratios: The cost-to-income (C/I) ratio remained under control at ~39%, reflecting prudent expense management.

Financial Highlights

Asset Quality and Credit Costs

- Stable GNPA/NNPA Ratios: Gross non-performing assets (GNPA) and net non-performing assets (NNPA) stood at 1.97% and 0.42%, respectively, in 2QFY25, highlighting robust asset quality.
- Credit Costs: The bank’s credit cost averaged 50 basis points, supported by a high provision coverage ratio (PCR) of ~79%.

Technical Analysis

Support and Resistance Levels

- Immediate Support: Rs 1,300
- Key Resistance: Rs 1,400 and Rs 1,500

Fibonacci Retracement Levels

Using the 52-week high of Rs 1,362 and low of Rs 970:
- 23.6% Retracement: Rs 1,071
- 38.2% Retracement: Rs 1,159
- 61.8% Retracement: Rs 1,233

Investment Case and Valuation

Valuation Metrics

ICICI Bank trades at a P/BV of 3.1x FY25E ABV and 2.6x FY26E ABV. With industry-leading return ratios and a diversified portfolio, the bank remains a preferred investment in the Indian financial sector.

Target Price and Recommendation

Motilal Oswal sets a target price of Rs 1,550, implying a valuation of 2.7x Sep’26E adjusted book value.

Competitive Landscape

ICICI Bank’s ability to balance retail and corporate growth while maintaining operational efficiency places it ahead of competitors like HDFC Bank and Axis Bank, which face challenges in deposit mobilization and margin stability.

Final Thoughts

ICICI Bank’s strong financial performance, robust asset quality, and well-defined growth strategies make it a compelling investment opportunity. While macroeconomic conditions and regulatory changes pose challenges, the bank’s proactive approach and technological advancements position it well for long-term growth.

**Disclaimer:** Investors are advised to conduct due diligence and consult with financial advisors before making investment decisions.